Time for a new economic order

Pakistans best hope today comes from the same building that housed economists and policymakers credited with the decade of development back in the 60s. This hope is in the form of a new framework for economic growth championed by Dr. Nadeemul Haque and his team at the Planning Commission (PC).
The
ew growth strategy or
ew development approach (NDA) recognises that a sustained GDP growth rate of 7 to 8 percent is required to absorb the annual labour force growth of 3 percent in the coming years.
The strategy emphasises on productivity and efficiency beyond the brick and mortar perspective, and views the government as a facilitator and enabler that complements efficient, competitive and connected markets.
It aims to make the regulations business-friendly, and focuses on urban development to foster innovation, entrepreneurship and productivity. It also talks about involvement of youth through community development and through provision of market opportunities.
With over 550 interactive sessions conducted domestically and abroad, the new growth framework has become the most widely discussed and consulted national document in Pakistan. Thanks to shrewd manoeuvring of the NDA team, the strategy now has the political ownership of the Prime Minister who approved it in the pre-budget National Economic Council (NEC) meeting last month.
The new framework has the backing of finance minister, while renowned experts, economists and former finance ministers have also thrown their weight behind the strategys implementation.
And implementation will be the key! While talking to BR Research, Dr. Vaqar Ahmed, the NDA team leader at the Planning Commission highlighted several aspects of the implementation process.
"The NEC in the post-18th Amendment milieu has allowed PC the functions of a) coordinating national planning system [including provincial P&D departments], b) introducing results-based management across provinces, and c) monitoring of national reforms agenda," said Ahmed.
The new framework treats physical infrastructure as only the hardware of economic growth, and incorporates the software - the organisation and management of firms, markets, cities and communities - into the growth calculus too.
Rationalisation of the throw forward of existing federal PSDP projects (over Rs3 trillion as on May 30, 2011) - through slashing projects not showing significant progress during the past 2 to 3 years - is a welcome development that will create some fiscal space for the new strategy to take hold.
The NDA team seems to have its hands full already. To introduce market reforms, especially those which focus on access to finance, enforcement of contracts & copyrights, and lowering of the barriers to entry, the NDA team would be collaborating with SBP, CCP and SECP respectively. This is where the PC wields strategic leverage to push through macroeconomic reforms compatible with the new strategy.
To convert cities into bastions of innovation and entrepreneurship, the NDA team is focusing on a few cities initially and plans to engage with Sialkot, Hyderabad and Sukkur clusters for an urban development strategy. This focused approach seems right as it will create a snow ball effect, helping the PC to sweep through the reforms process later in other cities.
Dealing with the provinces will be difficult; however, institutionalising of the reforms process will help. Its certainly a great omen that the provinces are going to be engaged at multiple levels of a) annual plan coordination committee, b) the NEC, and c) the economic coordination committee sessions.
All provinces can sequence their own growth strategies within the approved national growth strategy framework; however they will have to take ownership of the reforms.
There is a possibility of provincial social sector priorities becoming markedly different from the national agenda and a haphazard social development taking root in Pakistan. According to Ahmed, there will be some national standards for social sectors that will be ensured by the federal government. They may take the shape of national sectoral policy or any other form decided by the Council of Common Interests (CCI).
It is indeed time for a new economic order to replace the contemporary passive, inefficient, subsidy-driven and protectionist development policies with the ones that promote growth through productivity, innovation and entrepreneurship.